Skip to main content

Mutual Fund route of taking exposure to global equities

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Underlying securities in international funds or investments in mother funds are made in foreign currency, which makes them vulnerable to currency risk

THERE was a time when we Indians longed for anything and everything phoren. Right from perfumes and watches all the way to televisions and cameras, we drooled at those big global brands. Then, with the unleashing of economic reforms, the Indian economy took a dramatic turn from 1991 and transformed itself beyond recognition. It then was the turn of the global brands to fall head over heels on India to grab a pie of its growing prosperity.


However, today, we are in a state of worry about the threat of withdrawal by foreign investors. Times do change and how drastically! Unfortunately, the law of gravity seems to have caught up with the Indian growth story. The last few years have turned out to be a disappointment for the country's economy with global and domestic reasons conspiring to put a spoke in the smooth running wheel of India's rapid progress.


India's growth prospects, which seemed a given at about 8 per cent to 9 per cent, even quite recently, looks troubled today.


The need to diversify beyond Indian equities: It is quite obvious that no country will continue to perform well forever. Each one is going to have its own period of glory and worry (refer to the exhibit below). You can find India frequently alternating between the best and the worst performers. In general, while emerging markets are considered high potential, it is also equally true that they are more volatile.


Many emerging markets fell more than the developed markets, the originators of the 2008 crisis.

Similarly, while the BSE Sensex handsomely outperformed both the MSCI World Index and the MSCI EM Index in the 2002-2007 period, it has been quite the other way round in the 20082013 (YTD) period.

It is in this light that we need to continually review and re-evaluate our investment beliefs and practices in a dynamic world environment. We must also appreciate the risk of betting too much money on only one story. There are so many excellent businesses globally that are making lives easier and better for people. By keeping your money only within India, you are effectively ignoring 98 per cent of the global equity market. While some countries thrive on minerals and resources, there are others who have an edge in manufacturing or services.


Benefits of global investing:

Access to global industry leaders: You can participate in the wealth creation of the best and the biggest businesses globally, many of which do not have a presence in India. The largest retailer in the world, largest social networking company, largest software business and many more of your favorites can find a place in your portfolio.

Portfolio diversification: By adding global investments that have low correlation with Indian equities, the overall risk of your portfolio is reduced.

Currency diversification:

By spreading your investment across currencies, you are minimising a very potent risk. The recent sharp depreciation of the Indian rupee is a good wake up call.

Geo-political diversification: By spreading your investment across the globe, your investment will be less impacted by the political and geo-political risks of investing.

Here's an example of how a 20 per cent exposure to international equities enhanced performance even while reducing risks. The risk/return too improves, especially in bear markets.


Global investing now made easy:

Yes, scouting the global equity markets and picking from the thousands of stocks is indeed quite a task. But with mutual funds offering access to global equities through the feeder fund route, you can effortlessly invest abroad without any additional documentation or KYC procedures. On the whole, going global with your equity investing is a prudent and necessary step.


Risk factors:

Though investing globally enables diversification and also provides better risk-adjusted returns, investments are subject to several risks: Currency risk: Underlying securities in international funds or investments in mother funds are made in foreign currency, which makes them vulnerable to currency risk. Lately, the dollar has appreciated sharply against most emerging market currencies, with the domestic rupee reaching historic lows (Rs 66.25 per USD on August 27). A fund investing in, say, the US market, would benefit as follows. If an investor invests Rs 50,000 in an international fund when the rupee conversion rate is Rs 55 per US dollar (1,000 units @ 1 unit per US dollar), and exits when the conversion rate is Rs 65per US dollar, the investor's gain on account of the conversion factor would be Rs 10,000 [1,000 units * (65-55)], assuming there are no mark-to-market gains/losses. However, on the negative side, the appreciation of the rupee can result in capital loss.

Country/ geo-political risks:

International funds will always be subject to countryspecific, economic and geo-political risks pertaining to the country / region they invest in. For example, the economic dishevel caused by a tsunami and nuclear crisis in Japan in February 2011 impacted its market severely compared to other global markets.

Tax treatment:

International funds that invest at least 65 per cent in Indian stocks and the remaining in international markets are categorised as equity funds. Shortterm capital gains for such funds are taxed at 15 per cent for these funds, while longterm capital gains are tax free. Dividend received by unit holders under these funds is exempted from tax. All other types of funds (including all fund of funds) in this category are taxed like debt funds, where long-term gains would be taxed at a flat rate of 10 per cent without indexation or 20 per cent with indexation. Short-term gains will be added to the investor's income and will be taxed as per the applicable slab rates. These funds would also attract the dividend distribution tax of 28.34 per cent. Hence, investors must understand the structure of the international fund to know the tax implications.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...
Read more

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...
Read more

PPF lock in may be extended

The Finance Ministry is considering a proposal to extending the minimum lock-in period for withdrawal from PPF from 6 to 8 years. The purpose is to attract long-term funds for infrastructure development. The time limit for maturity of PPF may also be increased from the current 15 years. The limit up to which investors can avail of tax deduction under Section 80C on investment in PPF was hiked from `1 lakh to `1.5 lakh in the previous Budget. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now